RUSSIA TODAY V
The economic future of Russia looks better today than at any time in recent decades. At least, that was the belief of American economists who participated in the Round Table conversation that concluded our Global Partners program at Kuban State University in Krasnodar. This conclusion was based more on observation of daily life than on economic statistics, which was the reason that my group of professors had gone to Russia rather than collect data from the internet. The eyeball test does not provide infallible results, but it compensates for accounting “corrections” and political “spin.”
Evidence of the growing middle class is found not in statistics, which are misleading in a society of low prices and lower incomes, but in the appearance of bowling alleys, sports bars, and tee-shirts covered with advertising. Such activities prove that some people have money to spend and choose to spend it in imitation of the American and European middle class.
Western investments are succeeding. The huge Philip Morris factory was the equal of any in the western world. But its success lay in providing a product that the public wanted. (Russians are among the heaviest smokers anywhere).
Domestic investment is succeeding, too. The local brewery has the latest equipment, all funded by Russian investors. Moreover, the government campaign to shift public taste from vodka to beer has been highly successful—partly because Russians have become aware that vodka drunks are not useful in the labor force and that the life expectancy of men has fallen down to sixty! This probably reflects the combination of tobacco and vodka, but the impact of vodka is more immediate and more easily seen. Beer ads are everywhere, and they are well done.
The managers of these enterprises are young graduates who have been trained in western methods. Most importantly, they have learned to think like westerners—thanks to professors who made visits to the United States, Europe and Japan, and returned home with far more insights than could be obtained by reading books. The appearance of this new managerial class is highly encouraging, since this group should provide the leadership of the country in years to come.
In the past only the KGB was well informed about the world and fully aware of the miserable state of the Soviet economy. Vladimir Putin, a career KGB officer, has put many other former spymasters in key positions in his administration. Though analysts often considered this a worrisome development, it may be something we should welcome in the short run.
Putin’s two years in power have brought numerous changes in governmental attitudes that should aid in starting up new businesses both from local initiatives and foreign investment. One indication is the regulation on importing and exporting currency. Soviet rules closely monitored how much money tourists brought into the country and took out. God forbid that tourists should spend money elsewhere than in government stores! (God forbid that God should be mentioned.) The forms are still there, but now the immigration people realize that the rule is stupid and enforce it laxly.
There is still much to do in changing attitudes. I heard twice from officials a belief that Russia should not export raw materials, because it would only allow competitors to undersell local finished products. This is Econ 101, about which Marxist-trained administrators remain as ignorant as the average American humanities graduate. Soviet farmers still do not produce tobacco of dependable quality, and florists have to import all their flowers from Holland. But as institutions provide a favorable climate for new businesses, development will follow. Our economists found this climate much more favorable already than they had expected, and the trend was in the right direction.
William Urban, Lee L. Morgan Professor at Monmouth College, spent three weeks in Russia this summer on a Global Partners program sponsored by the Mellon Foundation.